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Budget 2018: Govt Should Focus On Relaxing Corporate Tax To Generate Employment Opportunities

The Government could make necessary arrangements to recognize flexi-staffing companies or outsourcing services and do away with the various laws that create an impediment to ease of doing business

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As the nation awaits the announcement of the Union budget 2018-19, industry quarters are speculating on the potential announcements and implications of the Budget. The Budget will be rolling on the heels of reports that GDP growth has been falling over the last two quarters. Two major reasons for this have unequivocally been Demonetization and the Goods and Services Tax (GST) initiative.

More than a year ago in November 2016, the Indian government announced demonetization. While its perceived intention was noble, it took away a lot of growth of the informal sector. This was not directly reflected in reported GDP figures; however, the impact on the organized sector ever since has reflected that reversal. Similarly, the implementation of GST six months back has also contributed to the economy's slowdown; globally, whenever a country has implemented such tax reforms it has witnessed slow growth for 1-2 years.

We feel that the situation will start stabilizing post March 2018 and we will witness a rise in GDP growth once again. At the same time, it is imperative to mention here that the government is seeking to create more employment opportunities for the masses amidst this turbulence. For a country as complex and varied as India, 90% of jobs are still in the informal sector. At least half of the job seekers in the employment age band of 18-60 years are either entrepreneurs or people who work by themselves. Recently, we also read that India has more than 1.6 million people employed with various taxi aggregating companies such as Ola, Uber and so many others. Such individuals are not active job seekers, nor will they ever reflect in a formal tallying of the jobs that we undertake. Thus, India is a unique setup where everybody is not necessarily a job seeker. The rise of thousands of startups and the Gig Economy also pays testament to that fact.

However, the government now needs to take the issue of formal employment more seriously. The Indian education system continues to be plagued by many issues from the past, so that's one area that deserves key focus. Even white-collar entry level jobs and blue-collar entry level jobs need more initiatives to enhance the value of the formal education system as the base of the job pyramid is primarily built with white-collar and blue--collar entry level jobs.

The government should thus focus the Union Budget 2018-19 on a few of the below proposals:

1. Upskilling mission: This focuses primarily on skilling existing and future employees by making them employable in modern tech-enabled industries. This will help them get better jobs with social security and a higher standard of living.  

2. Guarantee of minimum wages: While the government has guaranteed minimum wages to the eligible workforce, the percolation of accumulated economic benefits should reach the last man or woman in the pyramid.   The benefits of such percolation is that unlike the top of the pyramid where people are at the higher end of the economic cycle, consumption at the higher end of the pyramid doesn't have a multiplier affect like the affect it has at consumption at the lower end of the pyramid.

3. Ease of doing business:  The Government could make necessary arrangements to recognize flexi-staffing companies or outsourcing services and do away with the various laws that create an impediment to ease of doing business.  They need to speed up provisions like National licensing for CLRA and other such regulations that will create and foster greater formal job growth through the staffing or outsourcing companies.

4. Relaxation on corporate tax: The government should lower the corporate taxation rate like how the US government is similarly doing to arbitrage between lower taxation and higher spending. Higher spending is geared towards investment and that investment is geared towards employment. The government can thus devise schemes for corporates to easily get a rebate on corporate tax by generating more jobs.

5. Balancing the imbalanced workforce:
Today, 300-400 million people are involved in agriculture, but less than half is required. The construction industry is one of the highest contributors to employment here, while the goods and transport sector is the second highest after agriculture. At the same time, agriculture accounts for nearly 45% of the workforce but less than 25% of GDP returns. This imbalance can thus be transferred to the next best industries - the goods and transport sector or the construction sector.  Infrastructure development mainly Roads & highways, is leading to higher investment and flip to job growth through Goods and transport sector, as well as construction industry. The metric to measure these spends should be direct employment addition and social security coverage through ESIC, EPF and other such benefits.

However, India is a country where not every child who is born gets the same privilege as others in terms of education and other facilities necessary to lead a healthy livelihood. Therefore, it is the government's responsibility to focus on the base of the pyramid and strengthen the economically weaker section of society to unleash the true potential of India. And the Budget 2018-19 can do just that by making the right moves.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Tags assigned to this article:
Union Budget 2018 gst bill gdp growth

Lohit Bhatia

The author is CEO, IKYA Human Capital Solutions

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